83 FR 1442 - Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31E Relating to Mid-Point Liquidity Orders and the MTS Modifier and Rule 7.36E To Add a Definition of “Aggressing Order”
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 8 (January 11, 2018)
Federal Register Volume 83, Issue 8 (January 11, 2018)
| Page Range | 1442-1445 | |
| FR Document | 2018-00306 |
[Federal Register Volume 83, Number 8 (Thursday, January 11, 2018)] [Notices] [Pages 1442-1445] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-00306] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82447; File No. SR-NYSEAMER-2017-40] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 7.31E Relating to Mid-Point Liquidity Orders and the MTS Modifier and Rule 7.36E To Add a Definition of ``Aggressing Order'' January 5, 2018. Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that on December 22, 2017, NYSE American LLC (``Exchange'' or ``NYSE American'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 7.31E relating to Mid-Point Liquidity Orders and the MTS Modifier and Rule 7.36E to add a definition of ``Aggressing Order.'' The proposed rule change is available on the Exchange's website at www.nyse.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Rule 7.31E (Orders and Modifiers) relating to Mid-Point Liquidity (``MPL'') Orders and the MTS Modifier and Rule 7.36E (Order Ranking and Display) to add a definition of ``Aggressing Order.'' For MPL Orders, the Exchange proposes to amend the price at which a marketable MPL Order would trade when there are resting orders priced better than the midpoint. The Exchange also proposes to amend how resting orders with an MTS Modifier would trade in specified circumstances. Background As provided for in current Rule 7.31E(d)(3)(C), on arrival, an MPL Order to buy (sell) that is eligible to trade will trade with resting orders to sell (buy) with a working price at or below (above) the midpoint of the PBBO (i.e., priced better than the midpoint of the PBBO). The rule further provides that resting MPL Orders to buy (sell) will trade at the midpoint of the PBBO against all incoming orders to sell (buy) priced at or below (above) the midpoint of the PBBO (i.e., priced better than the midpoint of the PBBO). Current Rule 7.31E(i)(3) describes the MTS Modifier, including how a resting order with an MTS Modifier will trade. Current Rule 7.31E(i)(3)(E)(i) provides that if a sell (buy) order does not meet the MTS of the resting order to buy (sell) with an MTS Modifier, that sell (buy) order will not trade with and may trade through such order with an MTS Modifier. Current Rule 7.31E(i)(3)(E)(ii) provides that if a resting sell (buy) order did not meet the MTS of a same-priced resting order to buy (sell) with an MTS Modifier, a subsequently arriving sell (buy) order that meets the MTS will trade ahead of the resting sell (buy) order. Finally, current Rule 7.31E(i)(3)(E)(iii) provides that a resting order to buy (sell) with an MTS Modifier will not be eligible to trade if sell (buy) order(s) ranked Priority 2--Display Orders are displayed on the Exchange Book at a price lower (higher) than the working price of such MTS Order. Similarly, Rule 7.46E(f)(5)(I) (Tick Size Pilot Plan) provides that for Pilot Securities in Test Group Three, a resting order to buy (sell) with an MTS Modifier will not be eligible to trade if sell (buy) order(s) ranked Priority 2--Display Orders are displayed on the Exchange Book at a price equal to or lower (higher) than the working price of such MTS Order. Proposed Definition of ``Aggressing Order'' The Exchange proposes to amend Rule 7.36E to add a definition that would be used for purposes of Rule 7E. Proposed Rule 7.36E(a)(5) would define the term ``Aggressing Order'' to mean a buy (sell) order that is or becomes marketable against sell (buy) interest on the Exchange Book.\4\ This term would therefore refer to orders that are marketable against other orders on the Exchange Book, such as incoming orders and orders that have returned unexecuted after routing. --------------------------------------------------------------------------- \4\ The term ``marketable'' is defined in Rule 1.1E(u) to mean for a Limit Order, an order than can be immediately executed or routed. --------------------------------------------------------------------------- This term would also be applicable to resting orders that become marketable due to one or more events. For the most part, resting orders will have already traded with contra-side orders against [[Page 1443]] which they are marketable. However, there are circumstances when a resting order may become marketable, such as orders that become eligible to trade when a PBBO unlocks or uncrosses (e.g., MPL and Pegged Orders) or orders that have a trading restriction at specified prices (e.g., as discussed in greater detail below, orders with an MTS Modifier). To maximize the potential for orders to trade, the Exchange continually evaluates whether resting orders may become marketable. Events that could trigger a resting order to become marketable include updates to the working price of such order, updates to the PBBO or NBBO, changes to other orders on the Exchange Book, or processing of inbound messages (e.g., an update to Price Bands under the Regulation NMS Plan to Address Extraordinary Market Volatility). To address such circumstances, the Exchange proposes to include in proposed Rule 7.36E(a)(5) that a resting order may become an Aggressing Order if its working price changes, if the PBBO or NBBO is updated, because of changes to other orders on the Exchange Book, or when processing inbound messages. The order that becomes the Aggressing Order is the liquidity-taking order. Generally, if resting orders on both sides are determined to be an Aggressing Order, e.g., a locked PBBO becomes unlocked and as a result, MPL Orders are repriced, the later-arriving order will be the liquidity-taking order.\5\ However, if the evaluation results in only one side becoming an Aggressing Order, e.g., an order with an MTS Modifier becomes eligible to trade and the contra-side order(s) have no working price changes, the order with the MTS Modifier would become the liquidity-taking Aggressing Order. As described below, the Exchange proposes to use the term ``Aggressing Order'' in the rule text relating to the MTS Modifier. Because an Aggressing Order becomes a liquidity taker, such term could be applicable to other circumstances. For example, an order with a Non-Display Remove Modifier [sic] that trades as a liquidity taker would also be considered an Aggressing Order. However, at this time, the Exchange does not propose to amend its rules to use the term ``Aggressing Order'' because the rule already specifies which order is the liquidity taker. --------------------------------------------------------------------------- \5\ See, e.g., Rule 7.31-E(d)(3)(B). --------------------------------------------------------------------------- Proposed Amendments Relating to MPL Orders The Exchange proposes to amend the first sentence of current Rule 7.31E(d)(3)(C) to make this text applicable to any marketable MPL Order, and not just an arriving MPL Order. To effect this change, the Exchange proposes to use the term ``Aggressing Order'' and replace the phrase ``[o]n arrival, an MPL Order to buy (sell) that is eligible to trade'' with the phrase, ``[a]n Aggressing MPL Order to buy (sell).'' The Exchange also proposes to amend the first sentence of current Rule 7.31E(d)(3)(C) to describe at what price an Aggressing MPL Order would trade with contra-side resting orders that are priced better than the midpoint. The rule currently provides that an arriving MPL Order to buy (sell) would trade with resting orders to sell (buy) with a working price at or below (above) the midpoint of the PBBO. The Exchange proposes to specify that when an Aggressing MPL Order trades with resting orders priced better than the midpoint, it will trade at the working price of the resting orders, which is current functionality. For example, if the PBB is 10.10 and the midpoint is 10.13, and there are non-displayed sell orders of 100 shares with working prices of 10.11 and 10.12, an Aggressing MPL Order to buy with a limit of 10.13 for 200 shares would trade with such non-displayed sell orders at 10.11 and 10.12, respectively. The Exchange believes that this proposed amendment would promote transparency in Exchange rules regarding at what price an Aggressing MPL Order would trade. By using the term ``Aggressing Order,'' this rule would be applicable to a resting MPL Order that becomes marketable, such as after a PBBO unlocks or uncrosses. In the above example, if the MPL Order to buy is ineligible to trade because of a crossed PBBO, and while the PBBO is crossed, the Exchange receives the two non-displayed sell orders, when the PBBO uncrosses and the new midpoint is 10.13, the resting MPL Order would become an Aggressing Order and would trade with the non-displayed sell orders at 10.11 and 10.12, respectively. The Exchange also proposes to amend the second sentence of Rule 7.31E(d)(3)(C) to replace the term ``incoming orders'' with the term ``Aggressing Orders.'' This proposed rule change would provide greater specificity that any contra-side order that is an Aggressing Order, as defined in proposed Rule 7.36E(a)(5), would trade with a resting MPL Order at the midpoint of the PBBO. Proposed Amendments Relating to the MTS Modifier The Exchange proposes to amend Rules 7.31E(i)(3)(C) and (E) to specify circumstances when a resting order with an MTS Modifier would not be eligible to trade. Current Rule 7.31E(i)(3)(C) provides that an order with an MTS Modifier that is designated Day and cannot be satisfied on arrival would not trade and would be ranked in the Exchange Book. The Exchange proposes to describe new functionality relating to when an order with an MTS Modifier that is designated Day would not be eligible to trade. In short, if a later-arriving contra-side order can meet the MTS of a resting order with an MTS Modifier, the two orders would trade unless the execution would be inconsistent with either intra-market price priority or would result in a non-displayed order trading ahead of a same-side, same-priced displayed order.\6\ Therefore, as proposed, the Exchange would not permit an order with an MTS Modifier that crosses other displayed or non-displayed orders on the Exchange Book to trade at prices that are worse than the price of such contra-side orders. As further proposed, the Exchange would not permit a resting order with an MTS Modifier to trade at a price equal to a displayed contra-side order.\7\ --------------------------------------------------------------------------- \6\ Rule 7.36E(c) provides that the Exchange ranks all non- marketable orders on the Exchange Book according to price--time priority. \7\ A displayed odd-lot order that is not included in the calculation of the PBBO could be at the same price as an MPL Order. --------------------------------------------------------------------------- To reflect these changes, the second sentence of Rule 7.31E(i)(3)(C) would provide that when a buy (sell) order with an MTS Modifier that is designated Day is ranked in the Exchange Book, it would not be eligible to trade: (i) At a price equal to or above (below) any sell (buy) orders that are displayed and that have a working price equal to or below (above) the working price of such order with an MTS Modifier, or (ii) at a price above (below) any sell (buy) orders that are not displayed and that have a working price below (above) the working price of such order with an MTS Modifier. For example,if the PBBO is 10.10 x 10.16, on the Exchange Book there is a sell order (``Order A'') ranked Priority 3--Non-Display Orders for 50 shares at 10.12 and a sell order (``Order B'') ranked Priority 2-- Display Orders for 25 shares at 10.11, and the Exchange receives a buy MPL Order (``Order C'') with an MTS Modifier for 100 shares with a 10.16 limit, because the MTS cannot be met, Order C will not trade and will be ranked in the Exchange Book at the midpoint of 10.13. At this point, the Exchange would have a non-displayed buy order crossing both non-displayed [[Page 1444]] and displayed sell orders on the Exchange Book. If the Exchange then receives a non-displayed sell order (``Order D'') for 100 shares at 10.11, even though Order D would be marketable against Order C, it would not trade because a trade at 10.13 would be above the price of resting sell orders.\8\ Order D would be added to the Exchange Book at 10.11. --------------------------------------------------------------------------- \8\ Pursuant to Rule 7.31E(d)(3)(C), an Aggressing Order will trade with a resting MPL Order at the midpoint of the PBBO. --------------------------------------------------------------------------- If next, the Exchange receives a buy order (``Order E'') to buy 25 shares at 10.11, it would trade with Order B. As discussed above, this execution would trigger the Exchange to evaluate whether Order C becomes marketable against contra-side orders.\9\ In this scenario, because Order B has now executed, Order C is no longer restricted from trading at 10.11. Because Order C's restriction has been lifted and Order D does not have a working price change, Order C would become an Aggressing Order and trade as the liquidity taker with Order D at 10.11. --------------------------------------------------------------------------- \9\ See discussion infra regarding the second sentence to proposed Rule 7.36E(a)(5). --------------------------------------------------------------------------- Because proposed Rule 7.31E(i)(3)(C)(i) would be applicable to all securities that trade on the exchange, including Pilot Securities in the Tick Pilot Plan, the Exchange proposes to delete Rule 7.46E(f)(5)(I) as duplicative of the proposed new rule text. The Exchange also proposes to amend Rules 7.31E(i)(3)(E)(i), (ii), and (iii) relating to the behavior of resting orders with an MTS Modifier.\10\ The Exchange proposes a non-substantive change to Rule 7.31E(i)(3)(E) to change the term ``order(s)'' to ``orders,'' which the Exchange believes is a more technically accurate way to describe that a resting order with an MTS Modifier will be evaluated against individual orders. --------------------------------------------------------------------------- \10\ A resting order with an MTS Modifier that becomes an Aggressing Order would trade consistent with Rule 7.31E(i)(3)(E) and therefore would trade with individual orders that each meet the MTS. --------------------------------------------------------------------------- First, the Exchange proposes to amend Rule 7.31E(i)(3)(E)(i) to use the term ``Aggressing Order.'' Use of this proposed new definition would not change the functionality associated with this rule. Accordingly, as proposed, the rule would provide that if an Aggressing Order to sell (buy) does not meet the MTS of the resting order to buy (sell) with an MTS Modifier, that Aggressing Order will not trade with and may trade through such order with an MTS Modifier (proposed new text in italics). The Exchange believes that use of the term ``Aggressing Order'' in the context of this rule would promote transparency of which order is trading with the resting order with an MTS Modifier. Second, the Exchange proposes to amend Rule 7.31E(i)(3)(E)(ii) to provide that if a resting sell (buy) non-displayed order did not meet the MTS of a same-priced resting order to buy (sell) with an MTS Modifier, a subsequently arriving sell (buy) order that meets the MTS would trade ahead of such resting non-displayed sell (buy) order at that price (proposed new text in italics), e.g., at the internal locking price. The Exchange proposes to amend this rule to provide that the subsequently arriving order could trade ahead of a resting non- displayed order at that price. As described above, the proposed amendment to Rule 7.31E(i)(3)(C)(i) would address circumstances when an order with an MTS Modifier is locked by a displayed order. In such case, the subsequently arriving order would not trade with the order with an MTS Modifier. Finally, the Exchange proposes to delete current Rule 7.31E(i)(3)(iii) as superseded by proposed Rule 7.31E(i)(3)(C)(i) and (ii) and the amendments to Rule 7.31E(i)(3)(E)(i) and (ii). Because of the technology changes associated with these proposed rule change, the Exchange will announce the implementation date of this proposed rule change by Trader Update. The Exchange anticipates that the implementation date will be in the first quarter of 2018. 2. Statutory Basis The proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the ``Act''),\11\ in general, and furthers the objectives of Section 6(b)(5),\12\ in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to, and perfect the mechanism of, a free and open market and a national market system and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \11\ 15 U.S.C. 78f(b). \12\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed definition of ``Aggressing Order'' in Rule 7.36E would remove impediments to, and perfect the mechanism of, a free and open market and a national market system and, in general, protect investors and the public interest because it would provide for a definition in Exchange rules that describes orders that are or become marketable. The Exchange believes that the proposed definition would promote transparency in Exchange rules by providing detail regarding circumstances when a resting order may become marketable, and thus would be an Aggressing Order. The Exchange further believes that use of such definition would promote clarity in Exchange rules, particularly in the context of the amendments to MPL Orders and orders with an MTS Modifier. The Exchange believes that the proposed amendments to Rule 7.31E(d)(3)(C) to use the term ``Aggressing Order'' and to describe the prices at which an Aggressing MPL Order would trade would remove impediments to, and perfect the mechanism of, a free and open market and a national market system and, in general, protect investors and the public interest because it would promote clarity and transparency in Exchange rules regarding the behavior of marketable MPL Orders. In particular, the rule would provide greater specificity regarding how a resting MPL Order that becomes an Aggressing Order would trade. Finally, the Exchange believes that the proposed amendments relating to when a resting order with an MTS Modifier would be eligible to trade would remove impediments to, and perfect the mechanism of, a free and open market and a national market system and, in general, protect investors and the public interest, because the proposed rule change would ensure that there would not be an execution of a resting order with an MTS Modifier that either would be inconsistent with intra-market price priority or would result in a non-displayed order trading ahead of a same-side, same-priced displayed order. This proposed rule change would therefore promote just and equitable principles of trade by ensuring that displayed interest does not get traded through by a non-displayed order. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that the proposed rule change is not designed to address any competitive issues, but rather to add further clarity to Exchange rules by defining the term ``Aggressing Order'' and using that term in connection with MPL Orders. In addition, the rule is [[Page 1445]] designed to ensure that resting orders with an MTS Modifier would not trade through displayed orders or violate intra-market priority. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\ Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b- 4(f)(6)(iii) thereunder. --------------------------------------------------------------------------- \13\ 15 U.S.C. 78s(b)(3)(A)(iii). \14\ 17 CFR 240.19b-4(f)(6). --------------------------------------------------------------------------- A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),\16\ the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. --------------------------------------------------------------------------- \15\ 17 CFR 240.19b-4(f)(6). \16\ 17 CFR 240.19b-4(f)(6)(iii). --------------------------------------------------------------------------- At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) \17\ of the Act to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \17\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to rule-comments@sec.gov. Please include File Number SR-NYSEAMER-2017-40 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSEAMER-2017-40. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's internet website (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission's Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEAMER-2017-40 and should be submitted on or before February 1, 2018. --------------------------------------------------------------------------- \18\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\18\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-00306 Filed 1-10-18; 8:45 am] BILLING CODE 8011-01-P
![1442 Federal Register / Vol. 83, No. 8 / Thursday, January 11, 2018 / Notices
subject line if email is used. To help the notice is hereby given that on December with a working price at or below (above)
Commission process and review your 22, 2017, NYSE American LLC the midpoint of the PBBO (i.e., priced
comments more efficiently, please use (‘‘Exchange’’ or ‘‘NYSE American’’) filed better than the midpoint of the PBBO).
only one method. The Commission will with the Securities and Exchange The rule further provides that resting
post all comments on the Commission’s Commission (‘‘Commission’’) the MPL Orders to buy (sell) will trade at
internet website (http://www.sec.gov/ proposed rule change as described in the midpoint of the PBBO against all
rules/sro.shtml). Copies of the Items I, II, and III below, which Items incoming orders to sell (buy) priced at
submission, all subsequent have been prepared by the self- or below (above) the midpoint of the
amendments, all written statements regulatory organization. The PBBO (i.e., priced better than the
with respect to the proposed rule Commission is publishing this notice to midpoint of the PBBO).
change that are filed with the solicit comments on the proposed rule Current Rule 7.31E(i)(3) describes the
Commission, and all written change from interested persons. MTS Modifier, including how a resting
communications relating to the order with an MTS Modifier will trade.
I. Self-Regulatory Organization’s
proposed rule change between the Current Rule 7.31E(i)(3)(E)(i) provides
Statement of the Terms of Substance of
Commission and any person, other than that if a sell (buy) order does not meet
the Proposed Rule Change
those that may be withheld from the the MTS of the resting order to buy (sell)
public in accordance with the The Exchange proposes to amend with an MTS Modifier, that sell (buy)
provisions of 5 U.S.C. 552, will be Rule 7.31E relating to Mid-Point order will not trade with and may trade
available for website viewing and Liquidity Orders and the MTS Modifier through such order with an MTS
printing in the Commission’s Public and Rule 7.36E to add a definition of Modifier. Current Rule 7.31E(i)(3)(E)(ii)
Reference Room, 100 F Street NE, ‘‘Aggressing Order.’’ The proposed rule provides that if a resting sell (buy) order
Washington, DC 20549 on official change is available on the Exchange’s did not meet the MTS of a same-priced
business days between the hours of website at www.nyse.com, at the resting order to buy (sell) with an MTS
10:00 a.m. and 3:00 p.m. Copies of the principal office of the Exchange, and at Modifier, a subsequently arriving sell
filing also will be available for the Commission’s Public Reference (buy) order that meets the MTS will
inspection and copying at the principal Room. trade ahead of the resting sell (buy)
office of the Exchange. All comments II. Self-Regulatory Organization’s order. Finally, current Rule
received will be posted without change. Statement of the Purpose of, and 7.31E(i)(3)(E)(iii) provides that a resting
Persons submitting comments are Statutory Basis for, the Proposed Rule order to buy (sell) with an MTS
cautioned that we do not redact or edit Change Modifier will not be eligible to trade if
personal identifying information from sell (buy) order(s) ranked Priority 2—
comment submissions. You should In its filing with the Commission, the
self-regulatory organization included Display Orders are displayed on the
submit only information that you wish Exchange Book at a price lower (higher)
to make available publicly. All statements concerning the purpose of,
and basis for, the proposed rule change than the working price of such MTS
submissions should refer to File No. Order. Similarly, Rule 7.46E(f)(5)(I)
SR–CboeBZX–2017–023 and should be and discussed any comments it received
on the proposed rule change. The text (Tick Size Pilot Plan) provides that for
submitted on or before February 1, 2018. Pilot Securities in Test Group Three, a
of those statements may be examined at
For the Commission, by the Division of the places specified in Item IV below. resting order to buy (sell) with an MTS
Trading and Markets, pursuant to delegated Modifier will not be eligible to trade if
authority.27
The Exchange has prepared summaries,
set forth in sections A, B, and C below, sell (buy) order(s) ranked Priority 2—
Eduardo A. Aleman, Display Orders are displayed on the
of the most significant parts of such
Assistant Secretary. statements. Exchange Book at a price equal to or
[FR Doc. 2018–00303 Filed 1–10–18; 8:45 am] lower (higher) than the working price of
BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s such MTS Order.
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Proposed Definition of ‘‘Aggressing
SECURITIES AND EXCHANGE Change Order’’
COMMISSION 1. Purpose The Exchange proposes to amend
Rule 7.36E to add a definition that
[Release No. 34–82447; File No. SR– The Exchange proposes to amend
NYSEAMER–2017–40]
would be used for purposes of Rule 7E.
Rule 7.31E (Orders and Modifiers) Proposed Rule 7.36E(a)(5) would define
relating to Mid-Point Liquidity (‘‘MPL’’) the term ‘‘Aggressing Order’’ to mean a
Self-Regulatory Organizations; NYSE
Orders and the MTS Modifier and Rule buy (sell) order that is or becomes
American LLC; Notice of Filing and
7.36E (Order Ranking and Display) to marketable against sell (buy) interest on
Immediate Effectiveness of Proposed
add a definition of ‘‘Aggressing Order.’’ the Exchange Book.4 This term would
Rule Change To Amend Rule 7.31E
For MPL Orders, the Exchange proposes therefore refer to orders that are
Relating to Mid-Point Liquidity Orders
to amend the price at which a marketable against other orders on the
and the MTS Modifier and Rule 7.36E
marketable MPL Order would trade Exchange Book, such as incoming
To Add a Definition of ‘‘Aggressing when there are resting orders priced
Order’’ orders and orders that have returned
better than the midpoint. The Exchange unexecuted after routing.
January 5, 2018. also proposes to amend how resting This term would also be applicable to
srobinson on DSK9F5VC42PROD with NOTICES
Pursuant to Section 19(b)(1) 1 of the orders with an MTS Modifier would resting orders that become marketable
Securities Exchange Act of 1934 trade in specified circumstances. due to one or more events. For the most
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3 Background part, resting orders will have already
traded with contra-side orders against
27 17 CFR 200.30–3(a)(12). As provided for in current Rule
1 15 U.S.C. 78s(b)(1). 7.31E(d)(3)(C), on arrival, an MPL Order 4 The term ‘‘marketable’’ is defined in Rule
2 15 U.S.C. 78a. to buy (sell) that is eligible to trade will 1.1E(u) to mean for a Limit Order, an order than can
3 17 CFR 240.19b–4. trade with resting orders to sell (buy) be immediately executed or routed.
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![Federal Register / Vol. 83, No. 8 / Thursday, January 11, 2018 / Notices 1443
which they are marketable. However, applicable to any marketable MPL circumstances when a resting order with
there are circumstances when a resting Order, and not just an arriving MPL an MTS Modifier would not be eligible
order may become marketable, such as Order. To effect this change, the to trade.
orders that become eligible to trade Exchange proposes to use the term Current Rule 7.31E(i)(3)(C) provides
when a PBBO unlocks or uncrosses (e.g., ‘‘Aggressing Order’’ and replace the that an order with an MTS Modifier that
MPL and Pegged Orders) or orders that phrase ‘‘[o]n arrival, an MPL Order to is designated Day and cannot be
have a trading restriction at specified buy (sell) that is eligible to trade’’ with satisfied on arrival would not trade and
prices (e.g., as discussed in greater the phrase, ‘‘[a]n Aggressing MPL Order would be ranked in the Exchange Book.
detail below, orders with an MTS to buy (sell).’’ The Exchange proposes to describe new
Modifier). To maximize the potential for The Exchange also proposes to amend functionality relating to when an order
orders to trade, the Exchange the first sentence of current Rule with an MTS Modifier that is designated
continually evaluates whether resting 7.31E(d)(3)(C) to describe at what price Day would not be eligible to trade. In
orders may become marketable. Events an Aggressing MPL Order would trade short, if a later-arriving contra-side
that could trigger a resting order to with contra-side resting orders that are order can meet the MTS of a resting
become marketable include updates to priced better than the midpoint. The order with an MTS Modifier, the two
the working price of such order, updates rule currently provides that an arriving orders would trade unless the execution
to the PBBO or NBBO, changes to other MPL Order to buy (sell) would trade would be inconsistent with either intra-
orders on the Exchange Book, or with resting orders to sell (buy) with a market price priority or would result in
processing of inbound messages (e.g., an working price at or below (above) the a non-displayed order trading ahead of
update to Price Bands under the midpoint of the PBBO. The Exchange a same-side, same-priced displayed
Regulation NMS Plan to Address proposes to specify that when an order.6 Therefore, as proposed, the
Extraordinary Market Volatility). To Aggressing MPL Order trades with Exchange would not permit an order
address such circumstances, the resting orders priced better than the with an MTS Modifier that crosses other
Exchange proposes to include in midpoint, it will trade at the working displayed or non-displayed orders on
proposed Rule 7.36E(a)(5) that a resting price of the resting orders, which is the Exchange Book to trade at prices
order may become an Aggressing Order current functionality. For example, if that are worse than the price of such
if its working price changes, if the PBBO the PBB is 10.10 and the midpoint is contra-side orders. As further proposed,
or NBBO is updated, because of changes 10.13, and there are non-displayed sell the Exchange would not permit a resting
to other orders on the Exchange Book, orders of 100 shares with working prices order with an MTS Modifier to trade at
or when processing inbound messages. of 10.11 and 10.12, an Aggressing MPL a price equal to a displayed contra-side
The order that becomes the Order to buy with a limit of 10.13 for order.7
Aggressing Order is the liquidity-taking 200 shares would trade with such non- To reflect these changes, the second
order. Generally, if resting orders on displayed sell orders at 10.11 and 10.12, sentence of Rule 7.31E(i)(3)(C) would
both sides are determined to be an respectively. The Exchange believes that provide that when a buy (sell) order
Aggressing Order, e.g., a locked PBBO this proposed amendment would with an MTS Modifier that is designated
becomes unlocked and as a result, MPL promote transparency in Exchange rules Day is ranked in the Exchange Book, it
Orders are repriced, the later-arriving regarding at what price an Aggressing would not be eligible to trade:
order will be the liquidity-taking order.5 MPL Order would trade. (i) At a price equal to or above (below)
However, if the evaluation results in By using the term ‘‘Aggressing any sell (buy) orders that are displayed
only one side becoming an Aggressing Order,’’ this rule would be applicable to and that have a working price equal to
Order, e.g., an order with an MTS a resting MPL Order that becomes or below (above) the working price of
Modifier becomes eligible to trade and marketable, such as after a PBBO such order with an MTS Modifier, or
the contra-side order(s) have no working unlocks or uncrosses. In the above (ii) at a price above (below) any sell
price changes, the order with the MTS example, if the MPL Order to buy is (buy) orders that are not displayed and
Modifier would become the liquidity- ineligible to trade because of a crossed that have a working price below (above)
taking Aggressing Order. As described PBBO, and while the PBBO is crossed, the working price of such order with an
below, the Exchange proposes to use the the Exchange receives the two non- MTS Modifier.
term ‘‘Aggressing Order’’ in the rule text displayed sell orders, when the PBBO For example,
relating to the MTS Modifier. Because uncrosses and the new midpoint is • if the PBBO is 10.10 x 10.16, on the
an Aggressing Order becomes a liquidity 10.13, the resting MPL Order would Exchange Book there is a sell order
taker, such term could be applicable to become an Aggressing Order and would (‘‘Order A’’) ranked Priority 3—Non-
other circumstances. For example, an trade with the non-displayed sell orders Display Orders for 50 shares at 10.12
order with a Non-Display Remove at 10.11 and 10.12, respectively. and a sell order (‘‘Order B’’) ranked
Modifier [sic] that trades as a liquidity The Exchange also proposes to amend Priority 2—Display Orders for 25 shares
taker would also be considered an the second sentence of Rule at 10.11, and the Exchange receives a
Aggressing Order. However, at this time, 7.31E(d)(3)(C) to replace the term buy MPL Order (‘‘Order C’’) with an
the Exchange does not propose to ‘‘incoming orders’’ with the term MTS Modifier for 100 shares with a
amend its rules to use the term ‘‘Aggressing Orders.’’ This proposed 10.16 limit, because the MTS cannot be
‘‘Aggressing Order’’ because the rule rule change would provide greater met, Order C will not trade and will be
already specifies which order is the specificity that any contra-side order ranked in the Exchange Book at the
liquidity taker. that is an Aggressing Order, as defined midpoint of 10.13. At this point, the
Exchange would have a non-displayed
srobinson on DSK9F5VC42PROD with NOTICES
in proposed Rule 7.36E(a)(5), would
Proposed Amendments Relating to MPL buy order crossing both non-displayed
trade with a resting MPL Order at the
Orders
midpoint of the PBBO.
6 Rule 7.36E(c) provides that the Exchange ranks
The Exchange proposes to amend the
first sentence of current Rule Proposed Amendments Relating to the all non-marketable orders on the Exchange Book
MTS Modifier according to price—time priority.
7.31E(d)(3)(C) to make this text 7 A displayed odd-lot order that is not included
The Exchange proposes to amend in the calculation of the PBBO could be at the same
5 See, e.g., Rule 7.31–E(d)(3)(B). Rules 7.31E(i)(3)(C) and (E) to specify price as an MPL Order.
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![Federal Register / Vol. 83, No. 8 / Thursday, January 11, 2018 / Notices 1445
designed to ensure that resting orders change is consistent with the Act. SECURITIES AND EXCHANGE
with an MTS Modifier would not trade Comments may be submitted by any of COMMISSION
through displayed orders or violate the following methods:
[Release No. 34–82445; File No. SR–Phlx–
intra-market priority.
Electronic Comments 2017–99]
C. Self-Regulatory Organization’s • Use the Commission’s internet
Statement on Comments on the Self-Regulatory Organizations; Nasdaq
comment form (http://www.sec.gov/ PHLX LLC; Order Granting Accelerated
Proposed Rule Change Received From rules/sro.shtml); or
Members, Participants, or Others Approval of a Proposed Rule Change
• Send an email to rule-comments@ To Amend Rule 1059 To Make
No written comments were solicited sec.gov. Please include File Number SR– Permanent a Program That Allows
or received with respect to the proposed NYSEAMER–2017–40 on the subject Cabinet Trade Transactions To Take
rule change. line. Place at a Price Below $1 Per Option
III. Date of Effectiveness of the Paper Comments Contract
Proposed Rule Change and Timing for • Send paper comments in triplicate January 5, 2018.
Commission Action to Secretary, Securities and Exchange
Commission, 100 F Street NE, I. Introduction
The Exchange has filed the proposed
rule change pursuant to Section Washington, DC 20549–1090. On November 29, 2017, Nasdaq PHLX
19(b)(3)(A)(iii) of the Act 13 and Rule All submissions should refer to File LLC (the ‘‘Exchange’’ or ‘‘Phlx’’) filed
19b–4(f)(6) thereunder.14 Because the Number SR–NYSEAMER–2017–40. This with the Securities and Exchange
proposed rule change does not: (i) file number should be included on the Commission (‘‘Commission’’), pursuant
Significantly affect the protection of subject line if email is used. To help the to Section 19(b)(1) of the Securities
investors or the public interest; (ii) Commission process and review your Exchange Act of 1934 (‘‘Act’’) 1 and Rule
impose any significant burden on comments more efficiently, please use 19b–4 thereunder,2 a proposed rule
competition; and (iii) become operative only one method. The Commission will change amending the Exchange’s rules
prior to 30 days from the date on which post all comments on the Commission’s to make permanent a program that
it was filed, or such shorter time as the internet website (http://www.sec.gov/ allows transactions to take place in open
Commission may designate, if rules/sro.shtml). Copies of the outcry trading at prices of at least $0 but
consistent with the protection of submission, all subsequent less than $1 per option contract (‘‘sub-
investors and the public interest, the amendments, all written statements dollar cabinet trades’’). The proposed
proposed rule change has become with respect to the proposed rule rule change was published for comment
effective pursuant to Section 19(b)(3)(A) change that are filed with the in the Federal Register on December 14,
of the Act and Rule 19b–4(f)(6)(iii) Commission, and all written 2017.3 The Commission received no
thereunder. communications relating to the comment letters on the proposed rule
A proposed rule change filed under proposed rule change between the change. This order approves the
Rule 19b–4(f)(6) 15 normally does not Commission and any person, other than proposed rule change on an accelerated
become operative prior to 30 days after those that may be withheld from the basis.
the date of the filing. However, pursuant public in accordance with the II. Description of the Proposed Rule
to Rule 19b4(f)(6)(iii),16 the Commission provisions of 5 U.S.C. 552, will be Change
may designate a shorter time if such available for website viewing and
Prior to 2010, Phlx Rule 1059
action is consistent with the protection printing in the Commission’s Public
(Accommodation Transactions) allowed
of investors and the public interest. Reference Room, 100 F Street NE,
cabinet trade transactions at a price of
At any time within 60 days of the Washington, DC 20549 on official
$1 per option contract to occur in open
filing of such proposed rule change, the business days between the hours of
outcry trading for certain options
Commission summarily may 10:00 a.m. and 3:00 p.m. Copies of the
classes.4 In 2010, the Exchange
temporarily suspend such rule change if filing also will be available for
amended Phlx Rule 1059 on a pilot
it appears to the Commission that such inspection and copying at the principal
basis to allow sub-dollar cabinet trades
action is necessary or appropriate in the office of the Exchange. All comments
to take place at prices of at least $0 but
public interest, for the protection of received will be posted without change.
less than $1 per option contract.5 The
investors, or otherwise in furtherance of Persons submitting comments are
Exchange now proposes to amend Phlx
the purposes of the Act. If the cautioned that we do not redact or edit
Rule 1059 to make permanent its sub-
Commission takes such action, the personal identifying information from
dollar cabinet trade pilot program,
Commission shall institute proceedings comment submissions. You should
which currently is scheduled to expire
under Section 19(b)(2)(B) 17 of the Act to submit only information that you wish
on January 5, 2018.6
determine whether the proposed rule to make available publicly. All The Exchange permits sub-dollar
change should be approved or submissions should refer to File cabinet trade transactions to be traded
disapproved. Number SR–NYSEAMER–2017–40 and
should be submitted on or before 1 15 U.S.C. 78s(b)(1).
IV. Solicitation of Comments February 1, 2018. 2 17 CFR 240.19b–4.
Interested persons are invited to For the Commission, by the Division of 3 See Securities Exchange Act Release No. 82245
submit written data, views, and Trading and Markets, pursuant to delegated (Dec. 8, 2017), 82 FR 58825 (Dec. 14, 2017) (SR–
srobinson on DSK9F5VC42PROD with NOTICES
arguments concerning the foregoing, Phlx–2017–99) (‘‘Notice’’).
authority.18 4 See Phlx Rule 1059.
including whether the proposed rule Eduardo A. Aleman, 5 See Securities Exchange Act Release No. 63626
13 15
Assistant Secretary. (Dec. 30, 2010), 76 FR 812 (Jan. 6, 2011) (SR–Phlx–
U.S.C. 78s(b)(3)(A)(iii). 2010–185).
14 17 CFR 240.19b–4(f)(6). [FR Doc. 2018–00306 Filed 1–10–18; 8:45 am]
6 See Commentary .02 to Phlx Rule 1059. See also
15 17 CFR 240.19b–4(f)(6). BILLING CODE 8011–01–P
Securities Exchange Act Release No. 79782 (January
16 17 CFR 240.19b–4(f)(6)(iii).
12, 2017), 82 FR 6667 (January 19, 2017) (SR–Phlx–
17 15 U.S.C. 78s(b)(2)(B). 18 17 CFR 200.30–3(a)(12). 2017–01).
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Document Created: 2018-01-11 04:53:57
Document Modified: 2018-01-11 04:53:57
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 83 FR 1442 |
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